While oil prices are showing volatility following the announcement of OPEC’s production cuts, prices could remain more stable moving forward, now that markets know what to expect from the group—no Thanksgiving Day surprise.
“Petrocurrencies will benefit from the decision as prices will keep near current levels despite higher shale production,” Senior Currency Analyst at Market Pulse Alfonso Esparza told Oil & Gas 360®. “The Canadian dollar, Australian dollar, and the Norwegian krone will appreciate as long as crude prices are stable.”
Stronger petrocurrencies, particularly the dollar, create downward pressure on oil prices as the cost of purchasing crude for holders of other currencies increases. The dollar strengthened at the start of the year following the election of President Donald Trump but has since given back most of the gains.
U.S. – OPEC tug-of-war
“Oil prices will continue to be caught between the U.S. rising production and the efforts of the OPEC to reduce the glut,” added Esparza.
“Demand for energy continues to stagnate which makes the showdown even more intense as the U.S. exports have begun to move into markets usually dominated by OPEC members.”
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